Wage withholding

In general, employers are required to withhold Colorado income tax from any compensation paid to an employee who is either of the following:

a Colorado resident; or

a nonresident who performed work in Colorado.

Colorado income tax withholding is generally required with respect to any compensation that is subject to federal income tax withholding. Additionally, overtime compensation is subject to Colorado withholding even if it is exempt from federal withholding. Compensation that is subject to Colorado wage withholding includes, but is not limited to:

salaries and wages;

tips;

bonuses;

certain noncash fringe benefits; and

sick pay.

Please see IRS Publication 505 and the Colorado Wage Withholding Guide for additional information regarding taxable wages.

Colorado income tax withholding, along with the employee’s wages, are reported on IRS Form W-2, Wage and Tax Statement. The employee may claim credit for the withholding on their Colorado Individual Income Tax Return (DR 0104) and may claim a refund if the withholding exceeds the amount of tax due. A copy of any Form W-2 reporting Colorado withholding must be submitted with the taxpayer’s return.